It’s been a long time coming, but when Coventry Building Society finally acquired Co-op Bank, it created the UK’s second-largest building society with £90bn of assets under management.
The acquisition
Mutual benefit
At the start of the year, Coventry Building Society completed its £780m acquisition of the Co-op Bank. It had been a long time coming. It was revealed that the two were negotiating a deal in December 2023. The £780m price tag was announced in May 2024. Addleshaw Goddard advised Coventry Building Society on the deal. And the deal was done and dusted eight months later.
Of course, there are plenty of approvals required when you are about to create the second-largest building society in the UK, with almost £90bn of assets under management, some 4.5m members and customers, and a 1.7% share of personal accounts across the UK. As a result of the deal, the Co-op Bank became a subsidiary of Coventry Building Society, meaning the 153-year-old bank had returned to mutual ownership. The two businesses continued to operate as separate businesses post-deal – for “the time being” according to Coventry Building Society chief executive Steve Hughes. He also said the deal had created a “mutually owned business that’s deeply passionate about its members, customers, and communities”. Time will tell, but it is definitely a heavyweight in the UK consumer banking market.
The team
Board level
The team running Coventry Building Society is headed up by Steve Hughes (below), who’s been chief executive since April 2020. He had previously been chief executive of Principality Building Society, and finance director of the Lloyds Banking Group general insurance businesses.
David Thorburn is chair of the board, bringing more than 40 years’ experience in the industry, including four years as chief executive of Clydesdale and Yorkshire Bank. Lee Raybould has been CFO since 2020, when he joined from Nationwide Building Society, where he spent 16 years.
As would be expected, there’s a team of eight independent non-execs. Shamira Mohammed has been an independent non-executive director for six years, and no doubt will have provided crucial oversight to the Co-op deal. She is a chartered accountant, who trained with Francis Clark (now PKF Francis Clark). She also worked for KPMG and is currently chief accounting officer at Athora.
The history
Finally sent to Coventry
The Co-op Bank has definitely been through the mill, which maybe explains the great-value deal Coventry Building Society negotiated. In 2009 it grew rapidly following its acquisition of the Britannia Building Society. In 2013, its planned acquisition of 600 Lloyds branches collapsed, with the Co-op citing a “weak economic outlook”.
By 2013, the Prudential Regulation Authority announced it had a £1.5bn capital shortfall. The bank’s colourful chairman Paul Flowers resigned shortly before the announcement – but that was more to do with activities away from work. A planned flotation was shelved in 2014 and in 2017 it was sold to a consortium of private equity and hedge funds. In 2023 there was secondary buy-out interest from Cerberus Capital Management, but that never came to fruition.
The performance
Story so far
Coventry Building Society’s statutory profit before tax more than quadrupled in the first six months of the year compared with the first half of 2024 – it went up from £159m to £722m. The acquisition contributed most of the increase, adding £584m to the building society’s profit – and helped by the £780m consideration being more than 40% below the fair value of the net assets acquired.
On a like-for-like basis, underlying profit before tax grew 25% to £200m. CEO Hughes said that in such a transformational year “it was pleasing to see such a robust performance’, albeit ‘in-line with expectations”.
